Leniency Policies: Testing for Effectiveness

Abstract

Bill Kovacic has pioneered scholarship and practice in relation to the need for and the criteria that should apply in measuring the effectiveness of antitrust institutions. Leniency policies are widely regarded as having revolutionized cartel law enforcement. However, relatively little attention has been paid to testing their effectiveness in practice. Drawing on the experience with the Australian Competition and Consumer Commission’s Immunity Policy for Cartel Conduct as a case study, this chapter examines a range of approaches to leniency effectiveness-testing and analyses the insights available from each of them. The chapter considers the extent to which effectiveness can be tested having regard to the extent to which a leniency policy adheres to generally accepted criteria for an effective leniency policy (namely, severe sanctions, fear of detection and transparency and predictability). It explores various approaches to assessing the effectiveness of a leniency policy in achieving increased detection, prosecution and deterrence of cartel activity. It also examines effectiveness from a broader perspective, having regard to the leniency policy’s interaction with other aspects of the overall system for enforcement and compliance and the degree to which the policy is consistent with the competition authority’s institutional values. The insights derived from this Australian research are relevant for the approach taken to effectiveness-testing of leniency policies world-wide.

Keywords: antitrust, leniency policies, cartel

JEL Classification: K21